Insurance

Insurance for equity holders is about protecting the unvested portion of your wealth — the part the market hasn’t paid you yet — against events that would stop the vesting schedule or the income stream that services it. Generic life-insurance advice sizes coverage against current income and mortgage balance, which dramatically undersizes for tech employees whose on-paper compensation sits mostly in unvested equity. A senior engineer at a pre-IPO company with $3M of expected vesting over the next three years has much more at stake than a generic “10× your salary” policy would cover.

Term life against unvested equity

The right framing is: if you died tomorrow, what income stream stops, and what obligations remain? For a tech employee with unvested RSUs, the value lost is typically 1-4 years of projected vesting times your employer’s current share price. Term life (20- or 30-year) sized to that number, at the youngest age you can lock it in, is usually the cheapest insurance you’ll ever buy. A healthy 35-year-old can purchase $3M of 20-year term for well under $2k per year. Relative to the coverage size, that’s almost a rounding error.

Disability insurance when income is equity-loaded

Disability insurance is the underrated coverage for this audience. Group disability through your employer typically covers 60% of base salary up to a cap — often $10-15k per month — which is dramatically below the cash needs of a family with equity-heavy total comp. Individual long-term disability policies can supplement, and high-limit policies through specialty carriers (Berkshire, Lloyd’s) can underwrite higher income or professionals with specific medical concerns.

Pre-IPO employees face a specific gap: your “income” isn’t fully captured by salary, but most DI policies only underwrite W-2. That leaves the accumulated unvested-equity value unprotected. Some carriers will consider RSU income with a vest history; few will consider pre-IPO equity. This is where an insurance broker who specializes in tech employees earns their commission.

Umbrella at the liquidity event

Post-IPO or post-acquisition, umbrella liability insurance becomes meaningful. A $5-10M umbrella costs a few hundred dollars a year and covers catastrophic liability claims that your home/auto policies cap out on. The trigger to upsize umbrella is usually a step-change in net worth — a liquidity event taking you from $1M to $10M of assets means a lawsuit looking for a deep pocket starts to see one. Lifestyle infrastructure after a liquidity event covers this and adjacent post-windfall protections.

The one thing most tech employees skip

Key-person coverage for founders is the common miss. If you’re a founder at a 20-person company and you’re the single point of failure for the engineering org or the fundraising relationship, the company should carry key-person life insurance on you — payable to the company — so that your death doesn’t take the company with you. This is a corporate expense, not a personal one, but founders often forget to set it up in the Series A paperwork.

Next step

If you don’t have term life coverage equal to at least 2-3 years of projected equity-plus-cash compensation, address it before your next physical — rates tighten with age and underwriting findings. If your disability coverage is just group LTD through your employer, get an individual policy quote; the gap between group coverage and your actual need is usually meaningful. At liquidity events, re-price your umbrella; most pre-IPO homeowners are under-covered post-IPO.